What a Ponzi Is and Why It Always Works
The Basics of a Ponzi
In all Ponzi schemes, whether investing in bonds, (which don't exist) or writing for online sites ( which promise high revenues and don't pay); people are caught, and caught again, because the nature of the scheme is so seductive.
Part of that seduction is the crowd of people, "Just Like You" who claim to have prospered.
The procedure is standard.
The guy running the Ponzi gets a dozen people, "Just Like You" to tout his scheme.
The results are also standard.
As Easy As 1 - 2 - 3
Every Ponzi has virtually the same features.
I could use a bank, an investment scheme, but for ease of explantion I'll use an online writing site I'll call Scribled as the Ponzi.
This site promises to pay more than other sites.
Dozens of people, 'just like you' flood the 'Net praising Scribled. Some post how they got their fifth pay out, others how they make $100 a week.
You react to these statements from People Just Like You. After all, if they can make money like that online so can YOU.
This is Step One;
The Shill Game.
There are two types of Shill; paid and unpaid.
Paid Shills know exactly why they are touting the Ponzi, they get paid. Unpaid Shills are garden variety idiots who are not paid for endorsement.
A Paid Shill gets a percentage of what the Ponzi takes. S/he knows before the first key strike the job and the recompense. In the case of the writing site every one who joins using the Shill's reference number will now share 10% of their earnings with the Shill; on top of his weekly pay.
This is why Shills work so hard.
Those they Dupe join, post, and will be paid that first time.
When the Dupe gets that payout, they will become an unpaid Shill. They will run around proclaiming the greatness of the site.
Soon enough, the Owner doesn't need paid shills, he's got a battalion of unpaid ones to tout his site. Hence, he informs the Shills or locks them out.
How it Works
Just about everyone who joins Scrib is paid that first time.
These First Dupes (Group A) post and run around the 'Net extolling the virtues of the site, bring in new Dupes. (Group B)
And this is where the Ponzi actually begins.
Everyone in Group B is paid that first time but only a percentage of Group A is paid..
Those in Group A who are not paid, are fed stories to keep them churning out work, work which earns revenue to warm the pocket of the owner of the site.
By this time, the Dupes of Group B have brought in more Dupes. (Group C)
Everyone in Group C is paid that first time, a percentage Group B, and those in Group A who continue to bring in dupes.
Those of Group C are paid and extol the site and bring in more Dupes. (Group D).
Articles written by those in Group A/B/C who are not paid earn revenue for the Owner and allows him to pay Group D and then those Group E.
Considering how many people now belong to the site, only the most active and most talented Shills will be paid for their writing
This culling process, has nothing to do with the core; that is the actual writing. To remain paid requires that one bring in warm bodies every week.
The articles which get the most traffic are usually those stolen from early writers. The work is confiscated by the owner, the writer gets nothing.
As the Net fills with disgruntled unpaid writers, and the first set of Shills who find themselves also in the unpaid category join, the balance shifts. Complaints fill the 'Net. When this happens, the Site closes. For all Ponzis go down.
They go down when the money taken in isn't enough to pay the Dupes. They go down when the Owner feels he's made enough and wants to move to something else. They go down when the wrong person is ripped off and a Lawsuit lands on the Owner's Desk.
But they go down.
Why They Always Work
Ponzis always work.
They work because Stupidity is Infinite.
They work because they always give that First Pay Out, expecting the Dupe to Reinvest.
They work because the Dupe who was paid yesterday will lure new blood in today, and keep investing, even when that 2nd Pay Out is late.
Psychologists can tell you that if people are told to follow a procedure and it works the first time, they believe the reason it doesn't work the second time is for some personal reason; i.e. I didn't follow the procedure.
People will keep performing the procedure two, three, four more times without reward, because that first 'pay out' convinces them that it works, despite the fact it only worked 1 out of 5 times.
And because it worked that first time, they are Sure that this is right.
There is a Ponzi writing site running on the 'Net as I type. There are people defending that Ponzi, as I type.
I know it is a Ponzi, so do others who got that 1st or 2nd pay out and then nothing more.
There are people who are owed Five or more pay outs, and are still writing and will write until the site closes.
And these Dupes will join another site, and will Shill for it, until it goes down.